Hybrid Corporate Governance and its Effects on Innovation: A Case Study of AstraZeneca

Abstract

This case study looks at the relationship between the UK/Swedish pharmaceuticalfirm, AstraZeneca, and its shareholders from the point of view of its effects oninnovation. It uses a theoretical framework on corporate governance and innovationthat differentiates sectors according to the novelty, visibility and appropriability oftechnological change. High novelty requires a corporate governance system withstrong industry-specific expertise; low visibility requires good firm-specific perceptiveness.High appropriability favours shareholder supremacy as against stakeholderinclusion. The pharmaceutical industry appears to be high in all three, and this(according to accepted stereotypes) should favour the outsider-dominated corporategovernance system of the UK as against the insider-dominated Swedish system. It isfound that the corporate governance that resulted from the merger could indeed bedescribed as hybrid, but that (following the building up of one major US shareholding)it was a UK/Swedish/US hybrid. In spite of the apparent similarity of the UKand US ‘outsider-dominated’ systems, the US element made a crucial difference, ingiving engagement by a strong and well-informed shareholder who had someinfluence on other shareholders. This in turn helped to protect the firm to a significantextent from short-term pressures within the UK stock market, and thus to allow itto maintain its emphasis on long-term innovation.